SoundHound AI‘s (SOUN -0.93%) shares surged by almost 875% in 2024 primarily attributable to document third-quarter income efficiency and rising adoption of the firm’s conversational AI options by main manufacturers throughout industries. The inventory additionally benefited considerably from a bullish report from Wedbush analyst Dan Ives, who raised the firm’s goal worth from $10 to $22.
Palantir Applied sciences‘ (PLTR 2.09%) inventory posted exceptional positive factors of just about 385% in 2024, pushed by unprecedented demand for its Artificial Intelligence Platform (AIP), sturdy monetary efficiency, profitable partnerships, and inclusion in the benchmark S&P 500 index.
Whereas SoundHound AI recorded a a lot stronger share worth efficiency than Palantir, is it a greater or perhaps a comparable funding on a risk-adjusted foundation? Let’s discover out.
Diminished buyer focus threat
SoundHound AI dramatically diminished its overreliance on a small buyer base. Whereas the largest buyer accounted for 72% of income in 2023, the income publicity was diminished to solely 12% in the third quarter of 2024. Moreover, the prime 5 prospects now account for lower than 33% of the firm’s income, far decrease than the 90% income publicity in 2023.
SoundHound is seeing rising momentum in the automotive sector, particularly in the electrical automobile (EV) area. The corporate signed contracts with 4 new EV gamers in the third quarter, two of that are utilizing conversational intelligence options in actual time. SoundHound expanded its contract with Stellantis throughout a number of markets, with seven of the latter’s manufacturers utilizing its generative AI-enhanced digital assistant, SoundHound Chat AI. SoundHound AI can be making its presence felt in the Chinese language market by way of partnerships with DayinTec and a significant Chinese language multinational know-how firm. Being the largest EV market with an estimated dimension of $376.4 billion in 2024, the Chinese language EV market could be a main progress catalyst for SoundHound AI in the coming years.
SoundHound is a market chief for cellphone ordering options in the restaurant trade. The corporate’s cellphone ordering options dealt with over 100 million buyer interactions. A number of outstanding manufacturers are adopting SoundHound’s drive-thru and cellphone ordering system.
Lastly, SoundHound’s AI agent customer support options discovered a stable footing throughout industries like monetary providers, healthcare, insurance coverage, and retail. This enterprise phase accounts for over half of the firm’s income.
Polaris mannequin
SoundHound AI constructed its multimodal, multilingual Polaris basis mannequin and skilled it on billions of actual conversations and over 1 million hours of audio throughout a number of languages. The mannequin has helped enhance accuracy and cut back internet hosting prices — a stable aggressive benefit for a conversational synthetic intelligence firm. Polaris is already powering virtually one-third of all AI interactions for the firm’s restaurant prospects. This pattern is predicted to strengthen in the coming quarters.
Monetary energy
SoundHound AI’s monetary numbers converse volumes about its enhancing enterprise momentum. The corporate expects its 2024 income to be between $82 million and $85 million and 2025 income to be in the vary of $155 million to $175 million. The corporate expects to be adjusted EBITDA worthwhile by the finish of fiscal 2025.
SoundHound AI additionally boasts a robust steadiness sheet with $136 million in money and $43.8 million in debt at the finish of the third quarter.
Can SoundHound AI be the subsequent Palantir?
Though SoundHound is an distinctive AI-powered firm, its monetary energy and goal addressable markets differ considerably from Palantir’s.
SoundHound’s income jumped by 89% 12 months over 12 months to $25.1 million, whereas Palantir’s income was up by 30% 12 months over 12 months to $726 million. Whereas the top-line progress fee of the former is greater, income can be a lot smaller on an absolute foundation. Therefore, it’s apparent that SoundHound is an organization experiencing early progress, whereas Palantir has entered a extra steady and mature progress part.
SoundHound shouldn’t be but worthwhile and reported a usually accepted accounting rules (GAAP) working lack of $33.7 million in the third quarter. On the different hand, Palantir is worthwhile and posted a GAAP working revenue of $113.1 million in the third quarter.
From an operational perspective, authorities businesses and huge business organizations deploy Palantir’s superior information analytics and mining choices primarily for sophisticated and mission-critical functions. Subsequently, these options are deeply entrenched in the shopper’s operations, making it troublesome to modify to the competitors. The sticky buyer base is a significant aggressive edge for Palantir. Contrarily, SoundHound’s voice AI and conversational intelligence functions are used for circumstances comparable to restaurant ordering, automotive interface, and buyer assist.
Though vital, these aren’t integral to the functioning of the enterprise. Therefore, some purchasers can go for rivals comparable to Amazon‘s Alexa, Alphabet‘s Google Assistant, Apple‘s Siri, and Microsoft‘s Cortana.
Whereas there may be enormous progress potential for SoundHound AI, it might not have the ability to substitute Palantir in a sensible investor’s portfolio anytime quickly.
John Mackey, former CEO of Entire Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Suzanne Frey, an govt at Alphabet, is a member of The Motley Idiot’s board of administrators. Manali Pradhan has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Palantir Applied sciences. The Motley Idiot recommends Stellantis and recommends the following choices: lengthy January 2026 $395 calls on Microsoft and quick January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.